Hermitage Offshore Files Bankruptcy Due to Prolonged Market Slump
Faced with the prolonged downturn in the offshore market combined the 2020 impact of COVID-19, Hermitage Offshore Services announced that it has filed for reorganizational bankruptcy. The company said the step had become necessary when it was unable to reach a consensual agreement with its lenders.
Hermitage said it took this action following a prolonged slump in global oil prices, driven in part by the global coronavirus pandemic, and its effect on the company’s business. “While the Company would have preferred to complete its financial restructuring out of court, it was unable to reach a consensual agreement with its lenders, which made filing Chapter 11 necessary to provide a single forum for all continuing conversations with its lenders.”
Hermitage, which owns 21offshore support vessels operating primarily in the North Sea and the West Coast of Africa, anticipates that its operations and relationship with its customers and vendors will not be adversely affected by this process.
During the bankruptcy process, the company’s vendors and customers are afforded administrative status, which according to Hermitage’s statement means that payments for new shipments or services will be made in the ordinary course of business either by the company or one of the company’s managers. Similarly, customers will continue to receive uninterrupted service and the company will perform all of its duties and obligations under its current and future charter party agreements.
Over the past several months, Hermitage had taken a series of actions seeking to address is declining financial position. Reporting its first quarter results in June, the company warned that market conditions and its detreating financial position raised questions over its ability to continue as a “going concern.” At the time, they reported they were engaged financial advisors to provide consultation and commencing discussions with their lenders.
In July, the company reported that it had executed a forbearance agreement with its lenders regarding a potential default on its outstanding term loan. Yesterday, Hermitage announced that it had sold its two anchor handling tug supply vessels with the consideration being a release from the outstanding loans for the vessels.
The voluntary petitions for reorganization for under Chapter 11 of the Bankruptcy Code were filed in the United States Bankruptcy Court for the Southern District of New York for Hermitage Offshore Services Ltd. and 28 of its subsidiaries, including all its vessel-owning subsidiaries.